April 6, 2022
April 6, 2022
Last week we highlighted how several states were pushing through regressive tax cuts as their legislative sessions are coming to a close. Well, this week many of those same states took further actions on those bills and it’s safe to say we’re even less impressed than before. After shutting down a filibuster and rejecting attempts to target relief more equitably, Nebraska lawmakers moved forward with a bill that will, among other things, cut the top personal income tax and corporate tax rate. In Kentucky, the governor is expected to sign an income tax cut that will drop the state’s flat rate a full percentage point over the next several years. And Georgia legislators decided to proceed with the worst iteration of their tax cut bill, as it includes a shift to a 4.99 percent flat tax and, as a bonus, they scrapped the nonrefundable Earned Income Tax Credit (EITC) and cap on film tax credits that were included in previous versions. Not all the surprises were disappointing, however, as New Mexico lawmakers quickly got to work during their special session and have already sent the governor a bill that will provide residents with between $500 and $1,000 in tax rebates.
Major State Tax Proposals and Developments
- GEORGIA lawmakers passed a costly, imprudent bill that will increase personal exemptions, gradually implement a 4.99 percent flat tax rate, and cost over $2 billion annually when fully implemented. The deeply regressive bill will, on average, save the state’s top earners thousands of dollars a year and less than $50 for the state’s lowest earners. Earlier iterations included a cap on film tax credits and a nonrefundable 10 percent EITC but neither made it into the final version. – KAMOLIKA DAS
- The KENTUCKY General Assembly passed an income tax cut that would bring the state’s flat rate from 5 to 4 percent over the next few years. The new flat rate will drop to 4.5 percent as of 2023 as long as the state’s rainy day fund can cover 10 percent of general fund receipts and general fund receipts exceed appropriations after a 1 percentage point tax cut – both of which the state is expected to meet. The cut will cost Kentucky $888 million over the next two years, with 65 percent of the tax cut going to the wealthiest 20 percent of Kentuckians. Gov. Andy Beshear is expected to sign the bill, but considering Kentucky only requires a simple majority to override a veto, it is all but guaranteed that this permanent and top-heavy cut will go into effect. – NEVA BUTKUS
- MARYLAND Gov. Larry Hogan enacted a large tax cut package that includes nonrefundable tax credits for retirees 65 and older, a Work Opportunity Tax Credit, and sales tax exemptions for childcare products. The retiree tax cut alone is expected to cost over $1.5 billion over the next five years. As a nonrefundable tax credit, it does not reach seniors most in need of financial support. – KAMOLIKA DAS
- NEBRASKA lawmakers went through with the regressive tax cuts covered here last week, shutting down a filibuster and rejecting attempts to focus the cuts more on middle-income families along the way. The bill advanced will cut the top personal and corporate income tax rates to 5.84 percent, exempt all social security income, and expand on state property tax credits. With that deal done, Gov. Pete Ricketts turned immediately to making room for the tax cuts for upper-income households by vetoing legislative budget priorities that would have helped less advantaged Nebraskans, such as payments to caregivers of vulnerable individuals, affordable housing development, and supports for former prisoners re-integrating into society. – DYLAN GRUNDMAN O’NEILL
- The NEW MEXICO legislature went to work quickly during the special session, which began April 5 and ended after 12 hours, approving a two-part tax rebate that will net individuals and couples a total of anywhere between $500 and $1,000. – MARCO GUZMAN
- ALABAMA Gov. Kay Ivey signed legislation that will cut the $100 minimum business privilege tax in half for small businesses in 2023 and completely exempts small businesses from the minimum tax beginning in 2024, costing the state $23 million annually. Yet state lawmakers have shown zero appetite for reducing the state grocery tax, despite the numerous bills that were introduced earlier this year.
- As if to prove the point made by ITEP Research Director Carl Davis that gas tax holidays are poorly targeted and likely to be largely sopped up by the oil industry, CONNECTICUT Gov. Ned Lamont had to resort to publicly asking gas companies to kindly pass along savings from the state’s just-enacted holiday to consumers. Meanwhile the finance committee focused on genuine improvements to the state tax code, including increasing the EITC and creating a state Child Tax Credit.
- Senate Democrats in ILLINOIS released their $1.8 billion tax relief plan which would provide $100 checks per person with an additional $50 per child to households making less than $500,000 jointly. The proposal could also include a $300 property tax credit for families who own their homes and a temporary suspension of the 1 percent state grocery tax and state gas tax.
- KANSAS legislators repackaged dozens of tax proposals into three new bills during conference committee: a $91 million tax cut package compiled of 29 separate bills that were mostly unable to pass individually, a food sales tax phase-out, and a third controversial tax cut bill. The former was taken up by both chambers and passed with bipartisan support. The other bills will likely be considered when the state readjourns in late-April.
- Last week the MAINE House of Representatives voted in support of a plan that would change current income tax credits for childcare expenses borne by families by raising the maximum benefit amount to 200 percent of the federal credit.
- Gov. Gretchen Whitmer in MICHIGAN has vetoed a temporary suspension of the state gas tax, expressing preference for a suspension of the state sales tax on gas.
- Legislators in MINNESOTA are pushing for a refundable child tax rebate of $325 per child under 16 for single households earning up to $70,000 or married households earning up to $140,000 as opposed to Gov. Walz’s $1,000 direct payment checks. The cost of the child rebate is an estimated $308 million compared to the $2 billion cost of direct payments.
- NEW HAMPSHIRE legislators are debating reducing business tax rates. A House bill would have reduced the business profits tax rate from 7.6 to 7.5 percent and the business enterprise tax rate from .55 to .50 percent, but the House Ways and Means Committee removed the business enterprise tax reduction to maintain revenues.
- NEW YORK lawmakers have missed their deadline to finish the state budget, still discussing issues that include bail reform and a possible gas tax holiday.
- In OKLAHOMA, a Senate bill that would eliminate the sales tax on feminine hygiene products unanimously passed a House subcommittee.
- TENNESSEE Gov. Bill Lee proposed a one-month sales tax holiday on groceries and a permanent reduction in the professional privilege tax, which are together estimated to cost the state $80 million if implemented.
- The VIRGINIA special session went to recess on Monday after legislators failed to reach a deal on the two-year spending plan. The House and Senate are still divided over a costly $2 billion plan to double the standard deduction.
- In VERMONT, the Senate provided preliminarily support for legislation that would exempt tribal lands from property taxes. It goes up for final approval in the Senate next week.
What We’re Reading
- The Congressional Caucus on Black Women and Girls released a report on building a legislative agenda through the “Black Women Best” or BWB framework. The BWB framework recognizes the economic contributions made by Black women and argues that centering the needs of Black women in policy will result in an economy that works for everyone.
- ITEP Communications Director Jenice Robinson recently wrote about how state and local fines and fees exacerbate economic and racial inequities, as described by Tony Messenger in Profit and Punishment: How America Criminalizes the Poor in the Name of Justice. And the Los Angeles Times reports on how California policy plays into this pattern by withholding tax refunds from people with outstanding fines.
- The DC Fiscal Policy Institute recently wrote about the importance of extending the DC earned income tax credit to workers who file taxes with an Individual Taxpayer Identification Number (ITIN).
- The New Hampshire Fiscal Policy Institute discusses the senselessness of proposed business tax cuts and how the rate cuts primarily benefit large, multistate entities; nor have past reductions spurred significant economic growth.
- The Massachusetts Budget & Policy Center released a report highlighting how the Fair Share Amendment—an upcoming ballot initiative that would levy an additional tax on incomes over $1 million—could play a vital role in supporting education commitments from early care up through higher education.
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